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Net Metering at a Crossroads

The vast majority of those who have installed solar on their home or business in the U.S. participate in what’s known as "net-metering." Net metering, simply put, is an arrangement with your utility whereby you – as a producer of electricity – are credited for the full retail value of any electricity produced, but not used at the time of generation.

These bill credits can then be used to offset usage when the solar electric system isn’t generating electricity (at night, for example). Virtually every state in the nation has adopted net metering, making it one of the most prevalent and powerful drivers of small-scale solar generation. With net metering, businesses can more effectively manage electricity production and consumption, and significantly reduce short- and long-term energy costs, particularly in areas with tiered rate structures.

In fact, while other solar market mechanisms – feed-in-tariffs and renewable energy certificates (RECs) come to mind – get all the glory and attention, net metering has arguably been the policy foundation of the U.S. small-scale solar industry. At REC Solar, the overwhelming majority of the more than 8,000 systems we’ve installed nationwide are net-metered, and this is fairly indicative of what you’ll find throughout the industry. In California, for example, there are approximately 100,000 homes and businesses using net metering, with the number of systems not using net metering estimated at a slight fraction of that number.

Net metering today, however, is at a crossroads.

From one direction, we’re seeing states and utilities implement more innovative and expanded net metering opportunities. Under a typical net metering arrangement, the solar electric system offsets electricity consumption at a single meter. This works fine in most cases, but not all. Think of a rancher who has multiple meters in different locations for pumping water. A shopping mall owner who wants to reduce costs for tenants. Traditional solar-and-net-metering doesn’t often work for these folks. That’s why policymakers are increasingly looking to expand net metering programs – falling under the headings of virtual net metering, aggregate net metering, or community solar – to share the benefits of clean energy production with a broader base of customers.

The availability and workings of these programs vary widely. In Colorado, the forthcoming Solar*Rewards Community program will allow individuals to build systems and then market the system production to others, who receive the net metering benefits on a subscription basis. Massachusetts and Washington already have similar, albeit smaller, programs in place. In California efforts are moving forward to expand virtual net metering opportunities for both local governments and for structures with multiple meters, and San Diego Gas & Electric has proposed a new ‘Share the Sun’ program that would allow any customer to utilize the benefits of a nearby solar system. Individually, these aren’t going to revolutionize solar. Creating our clean energy future, however, requires that we create opportunities for everyone to potentially take part in the production and use of renewable energy, and these new net metering opportunities are a small but meaningful step in the right direction.

That’s not to say that everything is parades and parties in net metering-ville. Nope. In California (still the largest U.S. solar market by a wide margin) it’s expected that – without legislative action – there will be enough net metered systems to trigger the aggregate statewide cap on such systems next year. In theory at least, once that cap’s reached, the investor-owned utilities aren’t required to offer additional net metering opportunities. Likewise, utilities across the country are more aggressively exploring opportunities to offset lost revenue caused by net metering arrangements via customer surcharges. Thankfully, these efforts by utilities have been only marginally successful, but I expect this to be a dominant issue for the solar industry in 2012.

To recap, then, net metering is:

A significant contributor to favorable solar electric system economics.

A critical growth driver for solar.

Underappreciated - like the girl next door in a Taylor Swift song.

Ready to be expanded across the country via new policy models, while simultaneously being challenged in a number of venues.

That’s it, folks. Net metering 101. If you have any questions about how a net metered solar system can save your business money, please contact us.